Monday, October 15, 2007

India increases spending to replace old weapons

India has increased its defence spending by about 13% to Rs620 billion ($13.3 billion) for Fiscal Year 2001-02 (FY01-02) to enable it to replace obsolete weapon systems and build a credible nuclear deterrent based on a triad of aircraft, mobile-based missiles and sea-based assets.

When adjusted against inflation, the real increase in spending is about 7.9%. The defence budget is 2.5% of gross domestic product (GDP). Pakistan's defence budget is 2.8% of GDP, while that of China is estimated at around 3% of GDP.

"The increased provision is to meet enhanced expenditure on pay and allowances and modernisation of defence forces," the Ministry of Finance said in its budget document.

Departing from previous budget presentations, Finance Minister Yashwant Sinha made no reference to defence expenditure in his speech to parliament. Local analysts interpreted this as an effort to avoid fears of an arms race.

However, India's nuclear rival Pakistan reacted sharply to India's increased defence spending, saying it would upset South Asia's military balance. "The massive acquisition of armaments by India is a cause for concern for Pakistan as the bulk of its army is deployed along our border," said a Pakistani Foreign Office spokesman.

Indian defence officials said around a third of the budget will be spent on equipment programmes. The Indian Air Force (IAF) will receive Rs151.72 billion, or 24.% of the total budget. Officials said the increase in the IAF's capital outlay from Rs19.91 billion last year to Rs49.45 billion is for the purchase of aircraft and engines and indicates the purchase of 66 BAE Systems Hawk advanced jet trainers is likely to be finalised soon

Later this year the state-owned Hindustan Aeronautics Limited is to begin upgrading its first of 125 MiG-21bis (NATO reporting name: 'Fishbed') fighters with Russian, French and Israeli help in a project expected to cost $500 million-$700 million. The IAF is also negotiating mid-life upgrades for its MiG-27M ('Flogger-J'), MiG-29 ('Fulcrum'), SEPECAT Jaguar and Dassault Aviation Mirage 2000H fighters. The Mirage will form part of India's nuclear deterrent

The army receives Rs374.98 billion in the budget - 60.4% of the funds - a minimal increase over last year, to enable it to close negotiations with Israel for unmanned air vehicles and to acquire artillery-locating radar and surveillance devices for use along the border with China and Pakistan.

The Indian Navy (IN) has been allocated Rs91.38 billion, or around 14.7% of the budget. The service is finalising the acquisition of the Admiral Gorshkov, the 44,500-tonne former Soviet carrier for the price of its refit estimated at around $700 million. More than 40 carrier-based MiG-29K fighters are expected to cost an additional $1.2 billion. The IN has also opened negotiations with France for six submarines, is planning to lease a Russian nuclear-powered submarine and is awaiting government approval to revive its own submarine-building facilities.

There is no specific indication in the budget statement of expenditure on India's nuclear deterrent, estimated to be $500 million annually in recent years. Local defence analysts said it had been "cleverly hidden". However, official sources said one indication could be the capital expenditure of Rs82.46 billion on unspecified "other equipment" for the services, with the army getting Rs47.36 billion.

In January India successfully test-fired its Agni II intermediate-range ballistic missile. Officials said the nuclear missile would likely be introduced into service later this year. India is also developing the 3,500km-range Agni III

The allocation for ordnance factories has been increased nearly five times to Rs11.82 billion, signalling a move to increase self-sufficiency and improve the output of India's sluggish defence industry. The government will spend Rs9.16 billion on research and development, an increase of Rs915 million.